Google’s Grand Bargain

BRUSSELS—After two years of to-and-fro-ing, one of the world’s most ubiquitous companies Google Inc., has struck a deal with European Union regulators to address concerns that it is abusing its dominance in search and online advertising.

The EU side is arguing that the proposals mark a huge leap forward and will rein in Google’s ability to squeeze out rivals, as well as forcing the search engine giant to better label its products.

But there are plenty of critics who fear that the changes will in the end be mostly cosmetic and do little to address concerns about Google’s overwhelming might in Europe, where it enjoys a market share of over 90%.

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The full details of the settlement package aren’t yet known, and are most likely to emerge within the next two weeks. But based on what’s already been leaked to the press, including the Wall Street Journal, Google will continue to display web-search results the way it wants, and its algorithm – the unique mathematical formula that ranks search results – will be left untouched.

But EU regulators are understood to have extracted a concession that will make it harder for Google to hog space to post links that steer users to its own specialized search sites, such as Google Shopping and Google + Local, its local listings service. A raft of rivals, including TripAdvisor Inc. and Expedia Inc., have long argued that they have been shunted down the online pecking order by Google, which they also accuse of copying content. Others say they have literally been squeezed out of existence by Google.

Now, Google has promised to label its own specialist sites, though it’s far from clear what difference that would make. “If you label something as being a Google product, that’s a positive label as it’s such a strong brand, and it won’t give people a better chance to find an alternative,” remarks one lawyer familiar with the negotiations.

In what may be the most far-reaching concession, Google is also understood to have pledged to display at least three links to specialist sites–though again, how it would select and display those sites remains to be seen.

In another blow to rivals, the changes will most likely only apply to Europe, despite calls by the EU’s antitrust chief, Joaquin Almunia, that they should apply globally.

David Wood, who represents iComp, a group of complainants that includes Microsoft Inc., said he was concerned that it would be very easy to circumvent any of these measures, for instance if users were redirected to Google’s U.S. site, google.com.

Mr. Wood is also among many who are worried that complainants may not get a proper chance to test the proposals and see if they really work. “Google has had months, if not years, to test out the impact these changes,” he said. “We need to be given proper time to see if they will be effective.”

Complainants are hoping to get at least four weeks to respond to the proposals, and the concern among some is that the commission will not pay enough attention to any concerns they may voice. Mr. Almunia has said he wants to wrap up the Google case by the fall, which would leave little time to revisit the deal. Some may call for so-called ‘tripartite hearings’, a chance to sit down with both Google and the commission to discuss the settlement, although this would be highly irregular in such a case.

The Commission has for its part pledged to take any feedback seriously. “We will look carefully at the information and comments we receive, and we will take them into account in our assessment of whether the proposals address the Commission’s concerns,” said Antoine Colombani, Mr. Almunia’s spokesman.

People familiar with the EU’s thinking also say that there would still be room for some tweaks to the deal, though the likelihood of the commission launching a formal complaint against Google – which would set a far higher bar for a settlement – looks unlikely. “I rank the chance of that happening at around 10 to 15 per cent,” said a third competition lawyer.

What would happen in the event of a weak deal is, for the moment, anyone’s guess. Many parties are likely to hesitate to file appeals to the EU’s General Court, as such cases are typically hard to overturn. “If it’s not a good deal, it will fall under its own weight,” the lawyer said, refering to the likelihood that the commission would have to launch fresh proceedings against the Mountain View, Calif.-based company in future.

About Real Time Brussels

The Wall Street Journal’s Brussels blog is produced by the Brussels bureau of The Wall Street Journal and Dow Jones Newswires. The bureau has been headed since 2009 by Stephen Fidler, who was previously a correspondent and editor for the Financial Times and Reuters. Also posting regularly: Matthew Dalton, Viktoria Dendrinou, Tom Fairless, Naftali Bendavid, Laurence Norman, Gabriele Steinhauser and Valentina Pop.